I believe that's what they're trying to decide and apply in-game already.

The biggest concern though isn't a "logical" one like "it doesn't make sense to die and come back", it's probably the gameplay issues that having a hardcore arena creates - which would be having so few players playing a hardcore arena (and in such low levels where there's very little customization - from lvls 1-15, say) that it will just be an unused feature.